SYDNEY HARBOUR CASINO PROPERTIES PTY LTD v COLUZZI & ANOR

PARTIES : SYDNEY HARBOUR CASINO PROPERTIES PTY LTD v COLUZZI & ANOR JUDGMENT OF : Mason P at 1; Giles JA at 92; Heydon JA at 93

LOWER COURT JURISDICTION : District Court LOWER COURT DC 007832/98 FILE NUMBER(S) : LOWER COURT Mahoney DCJ JUDICIAL OFFICER :

Appellant: R Macfarlan QC/ P. Whitford COUNSEL : 1st Respondent: M Symonds (Sol) 2nd Respondent: D Davies SC/ S White Appellant: Pricewaterhousecoopers Legal SOLICITORS : 1st Respondent: Mark Symonds 2nd Respondent: Mallesons Stephen Jaques CATCHWORDS : Trade practices - sale of apartment off the plan - agent's representation as to likely return - Trade Practices Act 1974, s51A - "guaranteed" net return - agent's conduct unauthorised to the extent that he stated the return to be "guaranteed" - representation not exclusively promissory - no reasonable grounds for categorical "guarantee" - causation - challenge to credibility-based findings of trial judge - damages where property purchased - liability of agent to indemnify principal stemming from exceeding authority to market in particular way (ND) Ahmedi v Ahmedi (1991) 23 NSWLR 288 Australian Securities and Investments Commission v Solution 6 Holdings Pty Ltd (1999) 30 ACSR 605 City of Botany Bay Council v Jazabas Pty Ltd [2001] NSWCA 94 Donellan v Watson (1990) 21 NSWLR 335 Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 Gould v Vaggelas (1985) 157 CLR 215 CASES CITED: Henville v Walker (2001) 75 ALJR 1410, 182 ALR 37 Kizbeau Pty Ltd v WG & B Pty Ltd (1995) 184 CLR 281 Potts v Miller (1940) 64 CLR 282 Tetra Pak Marketing Pty Ltd v Musashi Pty Ltd [2001] FCA 1269 Thompson v Henderson & Partners (1990) 58 SASR 548 Ting v Blanche (1993) 118 ALR 543 at 552 Wright v TNT Management Pty Ltd (1989) 15 NSWLR 679 DECISION : See par 91

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

CA 40071/01 MASON P GILES JA HEYDON JA

Wednesday 20 March 2002 SYDNEY HARBOUR CASINO PROPERTIES PTY LTD v COLUZZI & ANOR

JUDGMENT 1 MASON P: The first respondent (hereafter the plaintiff) purchased from the appellant a two-bedroom serviced apartment at "Sydney Harbour Apartments". It was a purchase off the plan because the units were yet to be built. The development was adjacent to the Sydney casino and its Star City Hotel. The plaintiff claimed that the purchase was induced by misleading and deceptive conduct contrary to the Trade Practices Act 1974. 2 The contract was exchanged on 6 December 1996 and completed on 21 May 1998 after construction work was finished. The purchase price was $595,500 subject to adjustments for furniture, fittings and equipment. There was a special condition that asserted in a variety of ways that the purchaser relied entirely on his own inquiries. 3 An aspect of the marketing strategy was the proximity of the apartments to the Star City Hotel and the prospect of guests being induced to stay in one of the apartments instead of the five-star hotel. Naturally, the income stream from such an investment would depend on a multitude of factors including supply and demand for near city accommodation and the willingness of Star City Hotel to encourage its own prospective customers to look elsewhere for accommodation. It was the period during the run-up to the Sydney Olympics, and many other developers and investors were entering the city accommodation market at the same time. 4 The plaintiff was looking for a longer term investment. He saw advertisements for the apartments in the Wentworth Courier, some of them referring to "Net 7% plus returns". The appellant's selling agent was Colliers Jardine Pty Ltd, the second respondent (hereafter the agent). The plaintiff telephoned the agent and was put in touch with a salesman, Mr Con Foo. After preliminary discussions he arranged for his accountant Mr Poulos to contact Mr Con Foo. The ensuing discussion between Mr Poulos and Mr Con Foo is the critical event in these proceedings and I shall return to it. 5 The apartment did not live up to the plaintiff's investment expectations. By the time the contract was completed in May 1998 it was apparently worth much less than the adjusted contract sum of $626,000. On 3 August 2000 the plaintiff sold it for $322,000. He sued for the difference, plus interest and costs. 6 These proceedings were commenced in the District Court in October 1998. The plaintiff pleaded that the appellant, by its agent, made written and oral representations in various forms (Red 4-6). The detail is not unimportant, but the common theme is that the apartments yet to be built would yield a net income of not less than 7% per annum. The plaintiff pleaded that he was induced to enter into the contract and to purchase the unit. The representations were said to be false and misleading in that the return was below 1% per annum. The key representations were said to relate to a future matter and the plaintiff invoked s51A (2) of the Act, contending that neither the appellant nor its agent had reasonable grounds for making the particular representations. 7 In its Defence the appellant did not dispute that its advertisements contained projected outgoings and incomes, with an estimated net return of not less than 7% pa. However, it pleaded that the advertisements were accompanied by disclaimers and qualifications alerting prospective purchasers to rely upon their own inquiries. To the limited extent that it agreed that the alleged representations related to future events, the appellant also pleaded that it relied upon identified material giving reasonable grounds to hold the belief implicitly asserted in the representation. It was admitted that two-bedroom apartments like the one purchased by the plaintiff had returned a net income below 7%. 8 The appellant filed a Cross Claim against the agent claiming indemnity on various bases with respect to its potential liability to the plaintiff. 9 The trial took place before Judge Mahoney QC over eleven days in late 2000. Judgment was given on 24 January 2001. The plaintiff obtained a verdict and judgment for $304,000 plus costs against the appellant. On the cross-claim there was a verdict and judgment in favour of the cross defendant with costs. 10 In this appeal the appellant challenges each set of orders. 11 The agent filed a cross-appeal seeking a verdict for the appellant on the plaintiff's claim on various bases (which the appellant gratefully adopted). 12 On 4 September 2001 the plaintiff went bankrupt. The appointed trustee in bankruptcy elected to continue the proceedings in the pending appeal. However, no submissions were filed by the trustee or on behalf of the plaintiff. A solicitor representing both parties announced that they adopted a submitting role except as to costs. This meant that there was no effective contradictor on some of the key issues raised in the appeal. The decision at first instance 13 According to the judgment below, the case between the plaintiff and the appellant was fought on the basis that the relevant representation was made orally, by Mr Con Foo to Mr Poulos. The plaintiff had seen the newspaper advertisements at a time when his accountant was urging him to acquire a superannuation investment that could combine immediate taxation advantages and long-term capital growth. He construed the advertisements as meaning that he could expect a 7% annual return on capital invested. After making contact with Mr Con Foo he arranged for the accountant to get in touch with him to obtain confirmation about the figures. 14 There was a hard fought dispute at trial relating to conflicts between the evidence of Mr Poulos and Mr Con Foo about their discussions together. The trial judge preferred the evidence of Mr Poulos and he held that Mr Con Foo had confirmed that in the first year after completion of the contract there was a guaranteed net return of 7%, with Mr Con Foo suggesting that this figure could well increase in later years. 15 Mr Poulos reported back to the plaintiff and advised him to call for a contract so that he, Mr Poulos, would have the opportunity to examine the "fine print". The plaintiff approached Mr Con Foo who offered him the choice of a panel of solicitors maintained by the appellant. He also indicated that a Mr Wong was a solicitor prepared to do the job for a total fee of $1000, apparently less than what would be charged by a panel solicitor. The plaintiff instructed Mr Con Foo to send the contract to Mr Wong. 16 Mr Wong took the contract to the plaintiff at his workplace, an establishment well known to many city lawyers, called Bar Coluzzi. The contract was executed there after its legal effect had been explained by the solicitor. 17 The learned trial judge concluded that the plaintiff had entered into the contract as a result of actionable misrepresentation by Mr Con Foo. His Honour did not think that the small print disclaimers in the Information Sheets given by the agent to the plaintiff or the special condition in the contract nullified the legal impact of Mr Con Foo's misleading and deceptive conduct. The judge described the plaintiff as having had only a rudimentary schooling and as very significantly compromised in regard to his understanding of spoken English. He also recognised that there had been "commercial impetuosity", which I take to be a reference to the plaintiff's failure to bring the "fine print" of the contract documents back to Mr Poulos before going ahead.

challenge to the verdict in favour of plaintiff 18 The appellant challenged the plaintiff's verdict on several grounds. It was submitted that: (i) the representation was not made;

(ii) reliance on that representation was not established;

(iv) there were reasonable grounds for making the representation. 19 These grounds coalesced somewhat in the way the appeal was presented. 20 A ground of appeal asserting that the representation was not causative of financial loss was not pressed by the appellant in light of Henville v Walker (2001) 75 ALJR 1410, 182 ALR 37. However, both the appellant and (to a greater degree) the agent argued that the plaintiff had so abandoned concern for his own position that he could not establish reliance upon the misleading conduct. The agent also disputed some aspects of the damages computation. 21 A major plank in the appellant's case was the submission that the representation found by the trial judge was promissory in nature, and exclusively so. Because of this, the plaintiff's case upheld in the judgment was said to lie outside the pleadings, to be bereft of evidence as to reliance, and to be incapable of attracting the operation of s51A. This did not exhaust the appellant's challenge to the verdict, but the remaining points need to be addressed in light of this Court's conclusions as to the content and juridical nature of the findings concerning the representation made by Mr Con Foo to Mr Poulos. 22 Twice, fairly late in his judgment, Mahoney DCJ referred to the offending conduct as guaranteeing a net 7% p a return on invested capital (Red 57R, 62N). The appellant submits that the judge was in effect concluding that there was a promise that the appellant would ensure that the plaintiff received such a return on capital. The appellant further submitted that such a guarantee, being indefinite in time, was at variance with the evidence of Mr Poulos. This was also the springboard for an argument that the plaintiff must fail because he gave no evidence of reliance on the particular representation found by the trial judge. 23 In my view the appellant's submissions read too much into two summations late in the judgment. They also overlook the judge's reference to "a guarantee that a 7% net return on the price invested to purchase unit 1103 could be expected" (my emphasis). When the earlier findings are examined together with the evidence upon which they were necessarily based it becomes quite clear that the appellant's conduct, through Mr Con Foo, contravened the norm established by s52 and attracted the focus of s51A of the Trade Practices Act. 24 The critical representation occurred in a conversation between Mr Con Foo and Mr Poulos. However, the context is not without relevance. 25 The plaintiff was looking for an investment property. He saw an advertisement in the Wentworth Courier in relation to apartments that prominently proclaimed "Net 7% plus returns" and spoke of serviced apartments: estimated to return investors 7% net in the first year. The return should rise to 8% in the second year of operation, and 9% in the third year" (Blue 320). 26 The plaintiff contacted Mr Con Foo by telephoning the agent at the number shown in the advertisement. According to the plaintiff's statement (Blue 2) there was discussion relating to the 7% return and the guaranteeing thereof. Mr Con Foo said that he had made reference to these figures in his sales pitch to prospective customers in late 1996. The plaintiff was not accepted in his account of the conversation passing directly between himself and Mr Con Foo. Whether or not he was accepted about 7% having been mentioned is uncertain and ultimately does not matter. What is clear is that he arranged for his accountant Mr Poulos to telephone Mr Con Foo on the basis that he would pay the $5,000 holding deposit if Mr Poulos thought it appropriate to do so. 27 Mr Poulos contacted Mr Con Foo. He had been asked to make contact that day because Mr Con Foo had told the plaintiff that units were selling like "hot-cakes" and that if the $5,000 holding deposit was not paid that day "we'll lose it" (Blue 21). He gave Mr Poulos the money and sent him off to discuss matters with Mr Con Foo. 28 Mr Poulos gave the following evidence in his statement (Blue 21-22): I said: "What is the net return?" I remember that I specified "net return" as that was an important consideration for me. Gavin Con Foo (hereinafter referred to as GCF) said: "In the first year there is a guaranteed net return of seven per cent (7%). After the first year, the money will come from a pool and will grow to eight and a half to nine per cent (8.5%-9%) as demand for the units grows." I said: "Are you sure that it is guaranteed - a net seven per cent (7%)?" GCF said: "Yes. Possibly higher." … I said "Are you guaranteeing the seven per cent (7%) per annum net?" GCF said: "Yes. There will be a pool to be split by all the owners and it could go possibly as high as nine per cent (9%)."

29 Mr Poulos further stated that he was satisfied, on what he had been told, that the apartment met his criteria (being those previously discussed with the plaintiff as suitable investments). He gave Mr Con Foo the $5,000 holding deposit. Shortly thereafter he reported back to the plaintiff, telling him: "I went and saw Gavin Con Foo. Based on what he told me and the answers he gave to my questions, I gave him the five thousand dollar ($5,000) holding deposit. When the contract comes in let me have a look at it before you sign it". 30 Mr Poulos adhered to this evidence in cross-examination. He was firm in his testimony that Mr Con Foo had given "glowing references about the property and told me it was going to be guaranteed 7 percent for the first year and then he could envisage it rising to 8 or 9 percent in the following years" (Black 224. See also Black 172, 223, 240, 241). 31 Mr Con Foo agreed that during 1996 he had told prospective purchasers that: The Casino expects to get returns of 7% net, possibly increasing up to approximately 10% in subsequent years. However, he said that in November 1996 the Casino was not guaranteeing the returns from the departments. He did not have authority to do so and he denied having done so (Blue 325). 32 In the circumstances, the trial judge was entitled to prefer the evidence of Mr Poulos. 33 His Honour summarised the plaintiff's evidence (Red 42-43), concluding with the observation that the attack upon the reliability of the plaintiff's memory and upon his claim to be an accurate and reliable witness was in large measure a forensic success. He said that the plaintiff was a less than impressive witness. This does not however indicate the extent to which the plaintiff's testimony was rejected. Other findings, including the ultimately dispositive findings in the plaintiff's favour, indicate that he was accepted in part. 34 The trial judge then summarised the evidence of Mr Poulos in the following terms (Red 43N-44S): Mr Poulos gave evidence of having been contacted by the plaintiff about the matter and then of having spoken to Mr Con Foo and of receiving confirmation - with one particular qualification - from Mr Con Foo of the impression earlier gained by the Plaintiff. At the conclusion of his discussions with Mr Con Foo he was handed a sheaf of publicity material which he did not read. Then Mr Con Foo drove him up town, where he spoke to the plaintiff and gave him the sheaf of publicity material. He told the Plaintiff that his discussion with Mr Con Foo confirmed what the Plaintiff understood about the matter and advised him to call for a contract for sale from Mr Con Foo so that he, Mr Poulos, could have the opportunity of examining what might appropriately be described as the "fine print" in the documentation. He gave evidence about how this examination of what I have referred to as "fine print" constituted the second stage of his standard procedure when providing investment advice to clients, without which it would be "reckless" (TP 215) for him to recommend to any client that an investment should be made. He made it clear that, having had his discussion with Mr Con Foo, he advised the Plaintiff to call for the contract documents to be supplied to the Agent so that he, Mr Poulos, could examine them closely. He explained that, quite apart from this being the second stage of his standard advising procedure, it was necessary in this case because he had not been shown any documentation apart from the sheaf of publicity material that was handed to him at the conclusion of his discussion with Mr Con Foo. The qualification, to which I have adverted earlier, was that when Mr Con Foo confirmed that the 7% net return on investment was guaranteed, he recalled that the term of the guarantee was limited to the first 12 months after purchase. Mr Con Foo had suggested to him that this figure could well increase in subsequent years.

35 The judge recorded that the evidence in chief of Mr Poulos was closely tested in cross-examination and that it was at variance with some of the evidence of Mr Con Foo. Nevertheless, his Honour preferred and accepted Mr Poulos' evidence. He explained why did so at Red 45, 47-50, 62-3, 80-2. 36 These represent clear findings that the evidence in chief of Mr Poulos was accepted as accurate. In these circumstances, I would reject the appellant's attempt to drive a wedge between Mr Poulos' statement/testimony and the judge's summary of it. 37 I would also reject the appellant's complaint that the representation fell outside the pleadings in a manner that represented some procedural unfairness to the appellant. The case was fought on the basis of Mr Poulos' written and oral testimony. The pleading that "the Defendant guaranteed that the unit would return a net income of and at the rate of not less than 7%p.a." is quite consistent with this evidence. 38 In his response to cross-examination, Mr Poulos did not always distinguish clearly between the words said to him by Mr Con Foo and his impression of their meaning and effect. This is hardly surprising given the lapse of time, the form of some of the questions put by the cross-examiner and the relevance of the issue of reliance (see Black 223-227, 240-242). Nevertheless, the witness was firm that Mr Con Foo had said words to the effect of "Yes, it's guaranteed" (for the first year) in response to Mr Poulos pressing him as to the prediction of a 7% net return (see eg Black 242). 39 At one stage Mr Poulos indicated that it was his understanding from the use of the work "guarantee" that someone would top up the balance if there was a shortfall (Black 241). But this did not represent the totality of his evidence on the topic and the particular answer is part of a set of answers in which he was being pressed to state his understanding as to the "guarantee". 40 Both the appellant and the agent argued that the plaintiff took so little care for his own position that he was not induced by Mr Con Foo's conduct. 41 However, acceptance of Mr Poulos' evidence also provided a firm and sufficient basis for the conclusions as to reliance on the plaintiff's part. Mr Con Foo's confident representation triggered the plaintiff's decision to embark on this investment, evidenced by Mr Poulos' payment of the deposit at Mr Con Foo's urgent prompting. Mr Con Foo's statement to Mr Poulos reinforced the plaintiff's incipient understanding about the investment and provided the accountant with the basis for paying the part deposit in accordance with his instructions from the plaintiff. 42 The fact that the plaintiff was looking for a long term investment does not mean that a firm representation as to the return for the first year lacked materiality: a poor performance in the first year would be a pointer to the long term weakness of the investment. 43 It is true that Mr Poulos urged the plaintiff to come back to him with the contract before he signed it. However, the judge was entitled to find that the plaintiff's failure to do so did not break the causative effect of the original representation made to the accountant. The appellant and agent do not contend that the special condition in the contract about the purchaser relying upon his own enquiries precludes the award of damages if the other elements of a cause of action under the Act are made out. The real inducement from start to finish was the particularly firm representation made by Mr Con Foo to the plaintiff's accountant and that was the event that brought the plaintiff into the losing transaction. The plaintiff's "commercial impetuosity" (Red 64) cannot be converted into a defence to the claim: if anything it assists his case on reliance. 44 The appellant further submits that the representation found to have been made was exclusively promissory in nature, thereby incapable of attracting s51A. I do not agree. 45 Mr Con Foo's statements are also to be read in context. The advertising material in the Wentworth Courier and the Information Sheets issued by the appellant and its agent made clear and repeated reference to a predicted net return of 7% per annum for the first year, with predicted rises thereafter. The very small print in each publication disclaimed any intent to guarantee a particular return, but Mr Poulos was believed when he said that Mr Con Foo in substance had gone that extra step as regards the first year of the investment. 46 There are two reasons why the conversation cannot be treated as exclusively promissory in the sense of a mere promise by the appellant to make up the cash difference between the predicted and the actual net return. First, the word "guarantee" has a range of connotations inside and outside legal circles. It can certainly include a firm assurance as to a state of affairs. In my view, this is how the words would have been understood by the objective listener to the Poulos-Con Foo conversation and by Mr Poulos in particular. Secondly, a promissory component would not in the circumstances be inconsistent with actionable conduct involving the making of a representation capable of generating rights under the Trade Practices Act. After all, these were informal discussions which at their highest were collateral to a written contract for sale yet to be produced. 47 It is well established that promises, predictions and representations can sit together in a single conversation (see generally Lockhart, The Law of Misleading and Deceptive Conduct pp 80-88).

Did the appellant have reasonable grounds for Mr Con Foo's prediction? 48 It is convenient at this stage to address the submission that s51A could not be engaged. The section provides: 51A Interpretation (1) For the purposes of this Division, where a corporation makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act) and the corporation does not have reasonable grounds for making the representation, the representation shall be taken to be misleading. (2) For the purposes of the application of subsection (1) in relation to a proceeding concerning a representation made by a corporation with respect to any future matter, the corporation shall, unless it adduces evidence to the contrary, be deemed not to have had reasonable grounds for making the representation. (3) Subsection (1) shall be deemed not to limit by implication the meaning of a reference in this Division to a misleading representation, a representation that is misleading in a material particular or conduct that is misleading or is likely or liable to mislead.

49 Section 51A does not float in the ether. The relevant cause of action is found elsewhere in the Act (s82(1)) and it operates by reference to the norm of conduct stipulated in s52. 50 As Hill J put it in Ting v Blanche (1993) 118 ALR 543 at 552: …[s51A] is but an interpretation section, it does not of itself create a cause of action, nor [does it] define a norm of conduct. The relevant cause of action is to [be] found in s82(1) of the Act by reference to the norm of conduct laid down in s52 of the Act. What s51A does, in a practical sense, in cases where it applies, is to cast the burden of proof upon the respondent corporation who has made a representation about a future matter to show that in making that representation it had reasonable grounds for doing so. See also City of Botany Bay Council v Jazabas Pty Ltd [2001] NSWCA 94 at [81]. 51 A person claiming damages stemming from another's conduct in contravention of s52 must prove that the loss or damage claimed to have been suffered was "by" conduct in breach of s52. Issues of reliance and causation are necessarily engaged. In Wright v TNT Management Pty Ltd (1989) 15 NSWLR 679 at 683, Mahoney JA emphasised that an essential issue in determining whether a person's conduct has contravened s52(1) is determining "what is to be taken from that conduct" (see also Australian Securities and Investments Commission v Solution 6 Holdings Pty Ltd (1999) 30 ACSR 605 at 611). 52 In Tetra Pak Marketing Pty Ltd v Musashi Pty Ltd [2001] FCA 1269 Katz J drew attention to two aspects of the process of answering Mahoney JA's question: "What is to be taken from the defendant's conduct?". He said: 17. First, what was to be taken from the relevant statements includes, not only what was to be taken from them about the external world, but also what was to be taken from them about [the defendant's] own state of mind. As to what was to be taken from the relevant statements about [the defendant's] own state of mind, one issue which arises (although it may not be the only one, depending on its resolution) is whether [the defendant] was to be taken from those statements as having made assertions about the external world as facts or as mere opinions .

18. Secondly, the question need not be answered by giving to it a single "correct" answer and that is so whether one is focusing, in answering it, on what was to be taken from the relevant statements about the external world or on what was to be taken from them about [the defendant's] own state of mind. The question is instead to be answered by deciding what could reasonably have been taken from the relevant statements by those readers to whom they were directed. That may mean that, in the present case, there are many "correct" answers to the question, some of which may even contradict one another.

19. Both of the aspects to which I have just referred of the process of answering the question of what was to be taken from certain conduct were discussed by a Full Court of this Court in Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (1992) 38 FCR 1 (Sheppard, Foster and Hill JJ). The context in that case was the publication by the Tobacco Institute in various newspapers of a particular advertisement concerning the possible adverse health effects of environmental tobacco smoke. I will make reference below, not only to the Full Court's discussion of the two aspects to which I have referred above of the process of answering the question of what was to be taken from certain conduct, but also to its discussion of other aspects of that process.

20. Sheppard J said (at 5-6) of the words of the advertisement under consideration in that appeal, "Although words ought to be given their ordinary English meaning it needs to be recognised that some words or phrases will be capable of having more than one meaning. This is not a case of resolving such a problem by deciding that one particular meaning is the appropriate one. Rather, it is a case of ensuring that due allowance is made for the fact that different persons, each reading the advertisement reasonably and according to ordinary English usage, may reach different conclusions as to the meaning of particular expressions. Each of these possible meanings has to be allowed for. If one is misleading or deceptive there will be a breach of the Act. ... There was much discussion during the argument about whether the statements ... were statements of fact or opinion. It was the submission of counsel for the appellant that no reader could reasonably think that the statements were other than statements of opinion. I would reject that submission. I think that some readers may have taken that view. But it would be equally open to others to conclude that the advertiser was making factual statements.... [T]he better view is that the statements ... are statements of fact, but it is enough for present purposes to say that it was open to readers to infer that they were and to conclude that a significant number of readers would have so read them."

Sheppard J then turned (at 6) to the question of the meaning of a number of the words and expressions used in the advertisement complained about in that case. For the purpose of resolving that question, Sheppard J relied on "the ordinary meaning which they [that is, the words and expressions] have when they are used in the general run of English expression whether written or oral", as opposed to some technical meaning which they might also bear. So far as concerned two of the words which had been used in the advertisement, namely, "evidence" and "disease", Sheppard J considered that readers of the advertisement might reasonably have taken from the use of each of those words either one of two definitions of it appearing in the Oxford English Dictionary (2nd ed.) ("the OED"); he therefore considered each of those possible meanings of each word when determining whether the advertisement contravened subs 52(1) of the Act (see at 6-7 and 10). 21. Foster J (at 26) rejected any notion: "... that a court dealing with a claim under s 52 of the Act based on an alleged misleading or deceptive statement must necessarily make, as it were, a preliminary determination of its own as to whether the statement complained of is to be classified as one of fact or one of opinion: that is to say, a determination without regard to what might be the view of the class of readers, or some significant section of it, to which the statement is directed. It is the court's perception of the character which those readers would accord to the statement which is, at all stages, the determining factor." His Honour then rejected (at 26-27) a somewhat different submission which had been made before the Full Court by the Tobacco Institute, namely, that the relevant advertisement "was so obviously a statement of opinion and not of fact that only the most stupid of readers, whose interests, on the weight of authority, fall outside the protective circle of s 52, would have read it as a statement of fact". In doing so, his Honour said, "Whilst, no doubt, a section of the newspaper reading public might regard the [advertisement] as merely an expression of ... opinion, the remaining section which, in my view, would be of substantial size, would see it as a statement of fact. This, of course, is sufficient to require that it be accepted as a statement of fact when considering whether its publication constituted a breach of s 52 of the Act. " Foster J also made a number of references in his reasons for judgment to the process of determining the meaning of particular words and phrases in the advertisement. He referred (at 29) to "the question of what meanings could reasonably be attributed to the [advertisement] by the hypothetical lay reader"; he referred (at 31) to the fact that a significant number of readers would have understood a particular phrase in the advertisement in a particular sense and then continued, "It may have been capable of bearing other meanings, but in the type of inquiry necessarily required by s 52, that is beside the point"; he rejected (also at 31) the notion that the word "evidence" appearing in the advertisement should be construed according to the "meaning that it may have for persons trained in the disciplines of law or science"; and he rejected (at 32) the notion that the word "cause" appearing in the advertisement should be construed according to the meaning attributed to it in "scientific, philosophical or legal discussion". 22. Hill J referred (at 44-45) to two "separate, albeit related" questions arising in the appeal before the Court, with which questions it was necessary to deal: "The first is whether the ... advertisement ... should be seen to be a statement by the appellant of its opinion.... The second is the meaning of the words used in the advertisement". 23. As to what he had described as the first question, Hill J said (at 46) that "it must essentially be a question of fact whether a particular formulation of words expresses merely an opinion or a statement of fact". In the resolution of that question, his Honour said (at 46-47), "[T]he reader's perception of the maker's intention ... will ordinarily be the significant matter. The question will generally be resolved by looking to the persons to whom the statement was directed and asking whether any members of that class of persons would reasonably understand the statement to be one of fact or of opinion. Where, as here, the statement is directed to the public at large, it must be borne in mind that the class of persons will include the intelligent and the less intelligent, the informed and the less informed. The fact that some members of the class may perceive the statement as one of opinion will not avail a respondent if a not insignificant class of persons could reasonably be expected to perceive it as a statement of fact. ... [T]he advertisement is capable of being perceived as a statement of fact by a not insignificant section of the public, even if some members of the public, well informed, would not so see it. ... [T]he advertisement is reasonably open to be interpreted either as a statement of opinion ... or as a statement of fact.... If the former, it will be misleading, or will be likely to be misleading, if the [applicant] has shown that the view was not bona fide held by the [respondent] (and this is not suggested) or that the view was not reasonably capable of being held. If the latter, the [advertisement] will be misleading or likely to be misleading (ie to lead the reader into error) if the statement of fact made in it be false." 24. As to what he had described as the second question, Hill J said (at 48; 50), "The elucidation of the meaning of the words used in [the advertisement] is, like the question whether the [advertisement] is a statement of fact or opinion, made more difficult because more than one possible construction may be adopted by a particular reader.... ... Where, as in the present case, the advertisement is capable of more than one meaning, the question of whether the conduct of placing the advertisement in a newspaper is misleading or deceptive conduct must be tested against each meaning which is reasonably open. This is perhaps but another way of saying that the advertisement will be misleading or likely to mislead or deceive if any reasonable interpretation of it would lead a member of the class, who can be expected to read it, into error...." 25. While there were differences of expression among the three Judges who decided the Tobacco Institute appeal and, further, while there are differences of expression between all of them and what I have said above, I consider that the passages which I have set out above from their Honours' reasons for judgment in that appeal support, in substance, the correctness of the approach to which I have referred at [17] and [18] above.

53 Both matters highlighted by Katz J have relevance to the present inquiry. The first point reminds that a representation such as the one sued upon in the present case is capable of being characterised as a statement both as to the external world of fact and as to the opinion of the person making it. In my view both arms are engaged in the present case because the prediction was "guaranteed" by the predictor. 54 The second point made by Katz J reminds that the ambiguity inherent in certain statements may mean that the representor's conduct may have to pass muster at more than one level. This reinforces my conclusion that an exclusively promissory construction cannot be placed upon Mr Con Foo's representation. It also means that the defendants must establish the reasonableness of their conduct having regard to both aspects of its ambiguous content. 55 As indicated above, the trial judge was entitled to treat the "guaranteed" prediction of a 7% net return for the first year as a representation capable of attracting relief under the Trade Practices Act. It was correctly described as a "prediction" in the judgment (Red 57). The fact that the percentage return was "guaranteed", at least for the first year, was relevant to the issue of inducement, but it did not render the representation exclusively promissory. As a prediction the representation attracted s51A. Accordingly, it was taken to be misleading if not made on "reasonable grounds". 56 The appellant pleaded that it did have reasonable grounds for making such prediction and for holding the belief inherent in it. It relied upon statistical and other identified material (Red 13). 57 Mahoney DCJ concluded that it was not reasonable for the appellant to hold a view that its predictions were achievable. In addressing this issue, he commenced by observing that the belief which had to be shown to be reasonable was the belief in what the plaintiff was misled or deceived into entertaining, namely a guaranteed net 7% pa return on his invested capital. I respectfully agree with the broad thrust of the point his Honour was making. It may be reasonable to make a highly qualified estimate or prediction, but quite unreasonable for a party to proffer an unqualified and firm prediction such as is conveyed by the word "guarantee" in the present context. A fortiori, where it is made through the mouth of a selling agent professing significant expertise in the particular market. 58 The second prefatory comment made by the primary judge is also worthy of endorsement. His Honour said that it was important to appreciate that the defendant had spent a lot of time and effort in the case seeking to establish that at no stage did it ever make the prediction that was found to have been made. The appellant and the agent had made a conscious decision at the time not to go beyond giving local customers a highly qualified estimate. Mahoney DCJ was implicitly stating that this material was capable of showing that it would have been unreasonable for experienced players in the market to gone further at that time. I agree. 59 The primary judge's more particular reasons for concluding that the appellants had not satisfied s51A were expressed as follows (Red 58-61,72): All of the evidence from the Defendant is to the effect that the unexpected growth of availability of hotel rooms in the lead-up to the Olympic Games and the unexpected downturn in the Asian economy in 1997 combined to make such an achievement unattainable. The claim that there had been an unexpected growth in availability of hotel rooms in the lead-up to the Olympic Games is in stark conflict with some of the publicity material with which the Defendant, through the Agent, was seeking to entice people to invest in the project. Exhibit M, a large expensively produced brochure with a roulette wheel on the front cover, contains the following passages: Hot Property … The construction of Sydney Harbour Casino is a major element in the Government's urban renewal plans for the Pyrmont/Ultimo area. The redevelopment scheme of the Pyrmont peninsular is one of Australia's largest. The billion dollar transformation is well underway (sic) Sydney … Olympic City The promise of the world's number one sporting event has led to an unprecedented level of construction … All will help cater for Sydney's Olympic Games spectacular" The Plaintiff has demonstrated that the Defendant failed, in such in-house predictions as it did in fact make about levels of profitability, to take management costs properly into account. Furthermore, the Plaintiff has strongly pressed a suggestion that as the one reception desk was controlling the flow of guests to both the 5 star hotel and to the managed unit accommodation, of which unit 1103 was one, it would inevitably be the case that there would be a tendency for the hotel accommodation to be filled as a first priority at the expense of the unit owners' profit sharing. Mr Pratley, called for the Defendant, stoutly rejected this proposition and maintained that he had established a code of equitable sharing of the patronage. No clear evidence of how this had been achieved, apart from his say-so, found its way into the case. Certainly it was not demonstrated to my satisfaction that, whatever equitable sharing protocols Mr Pratley may have introduced, had been or could be enforced. When the type of patrons assiduously and enthusiastically encouraged to stay at the premises and gamble in the Casino, especially those whom the Defendant refers to as the "high rollers", is contemplated, the likelihood of them opting for self-catering accommodation so that they can save on the cost of meals and drinks and therefore accepting accommodation in the units, rather than in the 5 star hotel, would appear to be more than somewhat remote. With the best will in the world, the likelihood of an equitable sharing of patronage between the hotel and the unit owners is remote. Again, the opinions expressed by Mr Barbuto, called in the case against the Plaintiff by the Agent and relied on by the Defendant, are not based on a rigorous methodology. They are based in part upon what "… we understand…" (TP463), which turned out to be no more than a telephone canvassing of limited sources whose information may or may not have been reliable or relevant. Many of the base data items on which he relied for the expression of his opinion have not been demonstrated to be relevant, eg his opinion on owner's costs has been formed on the basis of a uniform set of accounts and not the actual accounts of the Defendant's operation (TP475-486) in order to "….get the same set of ratios…". He has presumed that Information Sheet 7 (exhibit T) revealed the management fees so that a purchaser knew that they would be before the purchase (TP488), whereas, as he was obliged to concede under cross-examination, that information is not so disclosed. He conceded that his opinion was based on anecdote and informally collated material some of which, indeed, was unable to be verified (TP497). These are some of the instances in his report and his evidence which seem to me to reveal a less than satisfactory methodology of conducting a rigorous, independent and reliable evaluation. Accordingly, wherever he is in conflict with opinions expressed by Mr Berry, I prefer the opinions of the latter because it seems to me that Mr Berry is more closely associated with this area of expertise than is Mr Barbuto and his methodology is more acceptable. The evidence from Mr Whiting is only of persuasive value if the opinions of Mr Barbuto are accepted. Mr Whiting explained that his contribution is limited by the terms of reference he was given. His expertise is not in real estate matters. He was required to make comparisons about figures and periods. In short, his evidence seems to go no further than to underline the fact that the Plaintiff did not earn 7% net return on his investment, and that, since the time the Information Sheets were put about, the basis of accounting with respect to the SHCA units has significantly changed. The evidence of Mr Goldberg and any opinions based upon his views or opinions, must all be seen as commencing from a strongly held view he expressed, even before the Plaintiff had any contact with the project, that the campaign of selling 2 bedroom apartments, such as unit 1103, was fraught with difficulties insofar as the attainment of financial targets was concerned. Annexure G to exhibit 9CJ is a clear indication of the reservations he harboured about their saleability. The submission that he was not asked to attend for cross-examination carries no weight. No amount of cross-examination of him would have made that point any more strongly. Even if the defence had called him, counsel for the Plaintiff need not have asked him any questions on the point. It had already been made for him. …. Again, the argument seems to proceed upon an assumption that I would have accepted the opinion evidence adduced against the plaintiff that the shortfall in the plaintiff's return on his money had been due to an unexpected increase in the supply of hotel rooms in Sydney after 1996 and to the Asian economic crisis. As I have sought to explain elsewhere in these reasons I have not accepted that opinion evidence. I have not accepted it because I have not been persuaded that the increase in the supply of hotel rooms in Sydney over the period in question was not to be expected. Exhibit M points to that very situation as being almost an inevitability. Nor have I been taken to any actual evidence to substantiate the theory which blames the Asian Economic Crisis for what happened to the plaintiff's investment. It remains no more than a defendant's mantra in the case. 60 The appellant's first challenge contended that s51A was not available because there was no "representation with respect to any future matter". (The agent did not join the appellant in this submission.) The appellant's submission must be rejected, because a prediction is par excellence such a representation. 61 The second ground of attack descended to the detail of the facts. This was the area where the agent pressed the argument even more strongly than the appellant itself. It was submitted that Mr Con Foo's representation was reasonably based when made particularly having regard to: (a) the failure to cross-examine Mr Goldberg, a hotel operator who had prepared some projections in December 1995 (one year before the plaintiff entered into the Contract);

(b) the unchallenged evidence of Mr Thompson, a director of the agent and a manager of the Hotel and Leisure Division of the agent in October 1996: he reviewed the Goldberg projections in October 1996.

(c) the evidence of Mr Poppleton, who was a marketing manager of the agent and who said that an estimated 7% net return was reasonable and who was not cross-examined in relation to that matter; and

(d) the evidence of Mr Barbuto, an expert called by the agent, who concluded in his report (Ex 6CJ) that a projected 7% net return was reasonable in the circumstances. 62 The agent's challenge to what I have described as the primary judge's more particular reasons faces the difficult task of contesting conclusions based in part upon the judge's assessment of the credibility of witnesses some of whose testimony was the subject of cross-examination (especially Messrs Barbuto and Berry). Mr Berry was the plaintiff's expert. The task is difficult in an appellate context, even where expert witnesses are involved (cf Ahmedi v Ahmedi (1991) 23 NSWLR 288), but not an impossible one. 63 The agent's criticisms of the Judge's particular reasons are set out at length in pars 21-38 of the cross-appellant's supplementary written submissions. 64 I shall deal with the substance of the points raised, without tarrying over matters of detail which I consider to raise inconsequential issues. 65 In my view the Judge was entitled to view the advertising material which forecast an Olympic-related surge in demand (Ex M) as capable of being put in the balance before acceptance of the defendants' expert evidence that growth in availability of hotel rooms in the lead up to the Olympic Games was unexpected. 66 The agent cites the report of Mr Barbuto (Ex 6CJ) as supporting its case that there was an unexpected growth in availability of hotel rooms. It is however significant that Mr Barbuto infers that the upsurge occurred in 1995-1996 (Blue 1171L), ie before the plaintiff entered into the contract. 67 The agent challenges the finding that the plaintiff had demonstrated that the defendant failed to take management costs properly into account (Submissions par 22). In light of the material assembled by the agent this criticism appears justified. (As in other aspects of this part of the appeal the Court did not have the advantage of a contradictor.) 68 Contrary to the submission of the agent, the Judge was in my view entitled to infer that "with the best will in the world, the likelihood of an equitable sharing of patronage between the hotel and the unit owners [was] remote". The very dramatic shortfall in the projected return for the units suggests to me that the reception desk at the casino hotel is likely to have looked to the hotel's interests in the allocation of guests as between the hotel and adjoining units, in the absence of clear and binding instructions to the contrary. To have done so would have involved no impropriety, but simple commercial self-interest. It was not incumbent on the plaintiff to establish anything, and the evidence of the hotel manager Mr Pratley on the topic, given in cross-examination, was less specific and compelling. This was a situation where the onus thrust upon the defendants by s51A was significant. In my view the criticism of this part of his Honour's particular reasoning is not sustained. 69 The agent's criticism of the finding that there was no evidence to substantiate the theory which blamed the Asian economic crisis for what happened to the plaintiff's investment (Submissions pars 25-28) appears justified. But the theory remained a conclusion which the judge was entitled to reject as a sufficient explanation for the shortfall. In any event, the removal of this prop does not undermine the viability of his Honour's conclusions on the s51A issue. The very fact that reference to the Asian economic crisis appears in a later part of the judgment, almost by way of addendum (Red 72) reinforces the impression that the rejection of the defendants' s51A case stood on additional, alternative and firmer foundations. 70 The agent is critical of his Honour's reasons for rejecting the evidence of Messrs Barbuto and Whiting and preferring the evidence of Mr Berry (Submissions pars 29-30). In some respects this challenge appears justified, at least in the details. However, the judge's conclusions (even on this limited aspect of the s51A case) turned in part upon a more general assessment of the comparative strength of the cases as presented through the testimony of the experts. The key witnesses were extensively cross-examined. I am not persuaded that the trial judge palpably misused the advantage which he had, compared to the Court of Appeal, in assessing the strength of the relative testimonies in this regard. 71 Next, the agent challenges the bases upon which the evidence of Mr Whiting was effectively rejected by the trial judge. His Honour said that Mr Whiting's evidence was only of persuasive value if the opinions of Mr Barbuto were accepted; and that Mr Whiting's expertise and relevant contribution to the s51A issue were limited and, in effect, unpersuasive. Having examined the cross-examination of Mr Whiting I am unpersuaded that the trial judge was obliged to accept Mr Whiting's conclusions, as the agent submits. In any event, the scope of work undertaken by Mr Whiting in his report (see Blue 1190-1) was only capable of casting indirect light on the s51A issue. Acceptance of Mr Whiting would not have compelled acceptance of the view that the defendants sustained the onus resting upon them of showing the reasonableness of the particular predictions upon which the plaintiff relied to his detriment. 72 As regards the primary judge's discounting of the evidence of Mr Goldberg (Agent's submissions pars 34-37) I am the view that this course was open to his Honour, even though Mr Goldberg was not required for cross-examination. The paragraphs of his affidavit upon which particular reliance is placed (pars 35-38 - Blue 534) are little more than a confident assertion ex post facto as to the reasonableness of Mr Goldberg's own projections in 1995 and 1996 (up to October 1996). 73 At the end of the day, the critical matter that sustains the judge's conclusions on the s51A issue is the failure to show the reasonableness of the firm "guaranteed" prediction which Mr Con Foo was found to have made, contrary to his denials and his instructions. The two prefatory comments made by the trial judge retain their force and sustain his Honour's conclusions. Furthermore, the detailed challenges to the detailed reasons have not persuaded me that this Court should overturn the judge's conclusions. 74 The evidence also shows that the defendants at trial would have had difficulty in establishing that they ever entertained the belief implicit in any representation of opinion that was made, namely a belief as to the attainability of the "guaranteed" return that had been represented. In my view, Mr Con Foo's conduct did import such a belief. 75 I have already indicated why the trial judge was correct to conclude that the defendants were somewhat stymied from the start having regard to (a) the force conveyed by a representation that included reference to a "guaranteed return" and (b) the fact that both defendants at trial insisted that Mr Con Foo had no authority to make such a bold and categorical representation. 76 The challenge to the conclusions on the s51A issue fails.

The agent's challenge as to damages 77 Unlike the appellant, the agent challenged the trial judge's conclusion as to quantification of the plaintiff's loss. As indicated above, Mahoney DCJ quantified the loss as being the purchase price of $626,000 including stamp duty and legal fees, less the subsequent sale price of $322,000 (Red 71). 78 The agent correctly submits that where property acquired in a transaction induced by a misrepresentation subsequently declines in value, damages are not awarded in respect of that decline if it is attributable to an independent, extrinsic or supervening cause (see Kizbeau Pty Ltd v WG & B Pty Ltd (1995) 184 CLR 281). 79 The essential point pressed by the agent is that the plaintiff's ultimate loss was not caused by the conduct of the defendants because: 1. the plaintiff paid more for the unit than what it was worth at the outset; and

the subsequent fall in value of the unit to $322,000 was attributable to supervening extrinsic factors, in particular the continuing impact of the Asian economic crisis and the increase in hotel rooms around Sydney. 80 In my view Mahoney DCJ's conclusions were justified in the light of his unassailable findings as to the impact of the misrepresentation upon the plaintiff's mind at the time of purchase. If it was the case that the plaintiff initially paid more than the unit was worth at the time this is not a matter that the defendants can rely upon in diminution of damages otherwise flowing from the misleading conduct. 81 It is also irrelevant that the unit was worth less than the value it would have obtained had Mr Con Foo's "guarantee" been a formal part of the purchaser's contractual rights. 82 As to the second point, the plaintiff was not obliged to dispose of the unit the minute he discovered that there was a shortfall in the "guaranteed" return. He was not shown to have acted unreasonably in waiting to sell when he did. Nor was it shown that a higher price was attainable than that obtained. The appeal against the agent 83 The appeal against Colliers Jardine, the agent, challenges the dismissal of the cross claim in the court below. 84 The claim is pleaded on various bases in the further amended notice of cross-claim (Red 25-30). The ground pressed in the appeal is pleaded in the following terms: 15. Further, or in the alternative, if (which is not admitted) the representations referred to in paragraph 11 above (and being paragraphs 6(a)(iii) and (iv) of the Statement of Claim) were made by Mr Gavin Con Foo on behalf of Colliers Jardine, and are found to be misleading and deceptive or likely to mislead and deceive, then such representations made by Mr Con Foo (which is not admitted) were made without authority express or implied pursuant to the agency agreement or otherwise, of SHCP in breach of warranty and authority, and SHCP is entitled against Colliers Jardine to: (a) an indemnity…. 85 The primary judge's reasons for rejecting the appellant's claim for indemnity against the agent are somewhat elusive. Mahoney DCJ rejected any express or implied basis for a contractual right of indemnity. He continued as follows: As for the defendant's contention that, if the Agent is held to have misled or deceived the Plaintiff then it should avoid being tainted with the same opprobrium, the evidence in the case is that both the Defendant and the Agent were working in close collaboration with one another in all of the work up of the marketing exercise. They were actively engaged in fine tuning it at the time the Plaintiff came over the horizon and continued so to collaborate eg by altering the basis upon which the Asian market was to be pursued. Both the Defendant and the Agent had membership of the Serviced Apartments Committee mentioned in the various documents admitted into evidence. The evidence indicates that both the Defendant and the Agent stood to earn the maximum gross and net profits which they could respectively anticipate. There is no suggestion in the evidence that, had it not been for the allegations raised in this case by the Plaintiff, there would have been any complaint from either the Defendant or the Agent against the other in connection with the marketing of the units generally or of unit 1103. Indeed, in the conduct of their respective defences there was more than a hint that they were working hand in glove with one another to defeat the claim of the Plaintiff. In the result, I find that the Defendant has failed to establish that the Agent has conducted itself in any way differently from what it was expecting to do in the enticement of purchasers to exchange a contract for sale. Indeed, the very existence of #32 in the contract for sale indicates that the Defendant did not expect that the salespersons employed by the Agent should be reticent in the manner in which they sought to entice potential purchasers.

86 The principle invoked by the appellant is that it is a legal incident of an agency relationship that an agent that causes the principal loss by exceeding instructions and thereby acting without authority is liable to indemnify the principal against such loss (see Bowstead & Reynolds on Agency 17th ed at 6-004; Fisher, Agency Law at 7.2.1; Donellan v Watson (1990) 21 NSWLR 335 at 341, 344). I do not perceive any disagreement between the parties as to this legal proposition. The principle has been applied in a legal context similar to the present one (see Thompson v Henderson & Partners (1990) 58 SASR 548). 87 The appellant cannot and does not assert that its agent lacked authority to communicate to prospective local buyers in late 1996 that the appellant predicted a return on capital in excess of 7% per annum, at least during the first three years following completion of the project (then anticipated for 1998). Its Information Sheet 7 was quite explicit in forecasting projected returns of 7.2% for 1998, 7.9% for 1999 and 9.7% for 2000 ("Olympic Year"), subject to the disclaimer that appeared in small italic type at the bottom of the page (Blue 1279). 88 During 1996 there were extensive discussions between the appellant's representatives and the agent's representatives as to whether a guaranteed 7% return should be offered as a selling inducement. The minutes of the agent's Apartment Committee meetings (Blue 104-111: see also Black 307) and the statement of Mr Con Foo (Blue 341) confirm that the decision was taken to confine a guaranteed return to "offshore market only" (Blue 109), which I understand to be a reference to prospective purchasers living in south east Asia. Mr Con Foo recognised explicitly that he did not have authority to offer people like the plaintiff a guaranteed return (Blue 323). It was only in 1997 (ie after the plaintiff had contracted to purchase) that the policy changed, at least for a while, in favour of offering non-Asian purchasers a similar guarantee. 89 In these circumstances, it would have been a clear breach of the agent's authority to represent on behalf of the appellant to an Australian purchaser in 1996 that there would be a guaranteed return of 7%. Yet that is what Mr Con Foo did and it was this (unauthorised) conduct that made the appellant liable to the plaintiff. 90 It follows that the appellant's appeal against the dismissal of its claim for indemnity against the agent succeeds. The trial judge erred, in my view, when he rejected the indemnity because the appellant and the agent had collaborated in their marketing efforts and their defence of the primary claim brought by the plaintiff. Since Mr Con Foo crossed the line agreed between the appellant and its agent (ie that no guaranteed net return would be offered) and since this was critical to the appellant's liability under the Act, the appellant was entitled to be held indemnified by the agent for the consequences of Mr Con Foo's unauthorised conduct. 91 I propose the following orders: 1. Appeal against the verdict and orders in favour of the first respondent Luigi Coluzzi dismissed.

2. Appeal against the dismissal of the cross-claim against Colliers Jardine NSW Pty Ltd upheld.

Set aside the verdict and judgment in favour of the cross-defendant in the cross-claim and, in lieu thereof, order the cross-defendant to indemnify the cross-claimant with respect to the cross-claimant's liability to the plaintiff for damages and costs.

Appellant to pay the costs of the first respondent, Luigi Coluzzi.

Respondent to pay one half of the appellant's costs of the appeal.

Cross-appeal dismissed with costs. 92 GILES JA: I have had the advantage of reading in draft the judgments of Mason P and Heydon JA. I agree that the orders proposed by Mason P should be made, and with his Honour's reasons save that on damages I prefer to adopt the reasons of Heydon JA. 93 HEYDON JA: I agree with: (a) the orders proposed by Mason P; and

(b) the reasons given by Mason P for those orders on all issues except damages. 94 While the trial judge's reasoning on damages is not wholly clear and may not be wholly sound, beneath his conclusion is an apparent assumption that the test for quantifying loss where misleading conduct induces a plaintiff to enter an agreement to purchase property is, leaving aside issues of consequential damage, to calculate the difference between the agreed price and the value of the property at the time that price was paid. Whether or not that was his assumption, that test is the prima facie test in the tort of deceit: Potts v Miller (1940) 64 CLR 282 at 297-299 per Dixon J. It was reaffirmed in more modern times in Gould v Vaggelas (1985) 157 CLR 215 at 220. The High Court has treated it as the prima facie test under s 82 of the Trade Practices Act 1974 (Cth) (Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1; Kizbeau v W G & B Pty Ltd (1995) 184 CLR 281). It was thus an appropriate test for the trial judge to seek to apply. There are recent authorities illustrating circumstances in which that prima facie test should not be applied, but the lines of reasoning underlying them were not relied on by the appellant and the agent and indeed those lines of reasoning are not applicable to the present circumstances. 95 Instead the appellant and the agent relied on three matters. 96 First, they said that the loss was in truth caused by supervening events unconnected with the contravention sued on. That contention is a legitimate means of negating the conclusions that would otherwise flow from the application of the prima facie test. But for the reasons given by the trial judge and Mason P that contention fails on the facts. 97 The second matter relied on by the appellant and the agent was that the purchase price of the unit was greater than its value at the time of the misleading conduct. But that is not a circumstance on which persons in the position of the appellant and the agent can rely: it is part of the harm which the misleading conduct caused. Had the misleading conduct not taken place, the plaintiff would not have bought the unit and would not have lost the two sums of money corresponding respectively to what it was worth and the surplus over what it was worth. 98 The third matter was a matter on which the appellant relied, at least for a time. The appellant contended that the plaintiff's case at trial was that but for the misleading conduct he would have invested his money more profitably elsewhere, and the trial judge failed to deal with that case. The appellant adopted the arguments which it and the agent put below on this question. This contention of the appellant is only partly correct: the plaintiff did put his case below in the manner described, but the trial judge, far from failing to deal with that case, rejected it for want of evidence. This third argument of the appellant was only advanced in its initial written submissions: in its second set of written submissions, it did no more than adopt the written submissions of the agent, and they did not deploy this argument. In any event, the third argument of the appellant goes nowhere. The plaintiff gave as one particular of loss and damage in his Statement of Claim, among others, the basis on which the trial judge proceeded ("Value of unit is substantially below its purchase price"). While it might have been open to the plaintiff to complain that one way of putting his case which could have produced a higher figure for damages than $304,000 was dealt with only briefly on the basis of a want of evidence, and to contend that the trial judge erred in his reasoning, the plaintiff did not make that complaint. It was open to the trial judge to select another path which had been pleaded and which was supported by evidence. This third contention is the only contention which challenged the validity of the test apparently employed by the trial judge. 99 The trial judge arrived at his figure of $304,000 by deducting from the $626,000 outlaid on the purchase the $322,000 which the plaintiff received on reselling the unit. It is convenient to compare the figure of $304,000 arrived at by the trial judge with the outcome of a strict application of the Potts v Miller test to Mr Berry's evidence. Mr Berry was a valuer called by the plaintiff whose evidence the trial judge accepted. Mr Berry's evidence was that the value of the unit without a 7% income guarantee as at the date of settlement was $395,000. The difference between the $626,000 outlaid on the purchase and $395,000 is $231,000. That is $73,000 less than the $304,000 awarded by the trial judge. But the plaintiff claimed interest, and there is no apparent reason why he should not have interest. The relevant period would be the period from when the bulk of his $626,000 was outlaid, 19 May 1998, until the date of judgment, 24 January 2001. The trial judge's judgment figure of $304,000 included no pre-judgment interest up to the date of judgment either from 19 May 1998, or from 3 August 2000, when the unit was sold, or from any other date. Interest rates in the period from 19 May 1998 to 24 January 2001 ranged between 9.5% and 11% per annum. If one assumes for simplicity's sake a rate of 10% over the whole period, the interest on $231,000 would have been about $62,000. The figure of $231,000 plus interest of $62,000, totalling $293,000, equates approximately to the $304,000 awarded by the trial judge (which did not include, as arguably it might have, interest between 3 August 2000 and 24 January 2001). 100 Allowing for the necessary imprecision in any process of evaluation, the difference between the outcome of a strict application of the Potts v Miller test in the light of Mr Berry's evidence and what the trial judge actually awarded is so slight as not to suggest any injustice in the outcome, even if the reasoning which led to that outcome might be challenged in points of detail in respects not alluded to by the appellant or the agent. 101 For those reasons the challenges advanced against the trial judge's damages award should be rejected. ***************

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